Powering up the Waka

When it comes to the impact of climate change and greenhouse gas emissions, all of us are affected, and that applies doubly for future generations. We will be in the same figurative boat.

And if we are to mitigate, offset, and reduce those emissions, we all need to be “pulling in the same direction”, coordinating our work to have greatest impact. That’s also the message of He Waka Eke Noa, the New Zealand primary sector initiative that is creating an administration and pricing model that will incentivise and support farmers and growers to meet emissions reporting and reduction responsibilities.

Through February and March 2022, He Waka Eke Noa participants including Beef+Lamb New Zealand, DairyNZ, and Federated Farmers ran roadshows through New Zealand. They have explained the various pricing, reporting and compliance options to farmers and sought feedback.

The options include a fallback into the existing NZ Emissions Trading Scheme (ETS), from which agriculture has, until now, been excluded, or a separate levy scheme that could operate at farm level, processor level, or as a hybrid that starts with processors and moves to farm level over time.

Both the ETS and the He Waka Eke Noa approaches start with the same staged entry of agriculture into the scheme, with 95% of emissions as a “free allocation” initially, reducing by 1% per year. The industry-led approach has some benefits:

  • A pricing model that could recognise short-lived but highly warming methane separately from long-lived cases like carbon dioxide and nitrous oxide.
  • Recognition of additional types of carbon sequestration that are not currently recognised in the NZ ETS (smaller areas of native vegetation and riparian planting for instance).
  • Significantly less “averaging” (particularly with farm and hybrid levy options) that may give farmers a lever and incentive to reduce emissions.

If the He Waka Eke Noa scheme can operate efficiently and achieve its goals, it could have a significant overall impact and show real leadership at a time when agriculture is still excluded from most regulated emissions schemes, and instead being addressed through market-led supply chains.

The administration cost estimates for the levy schemes trouble me, particularly when compared to the backstop option of the NZ ETS. The He Waka Eke Noa papers estimate annual administration costs for the farm-level levy at $80m to $96m NZD per annum (and this is administration, not the levy itself), of which $32m to $48m NZD is the cost of farmer time in reporting. The estimates for farmer time in the processor-level hybrid levy are still $27m to $43m NZD.

There certainly will be compliance costs in operating any levy scheme, including regulatory reporting and the costs of translating to carbon units. He Waka Eke Noa’s detailed pricing however estimates that in the farm-level levy, dairy farmers will spend 5 to 10 hours and other farmers 5 to 75 hours annually (reducing over time as they gain experience). Additionally, consultants will be used by a proportion of farms. The numbers allow for four hours of desktop auditing and/or 12 hours of on-farm auditing (auditing 10% of farms annually).

Broken down, none of the numbers are individually extraordinary, and I’m sure there are assumptions that information technology will be used – but I wonder how much technology and existing data and solutions could be leveraged (as opposed to just electronic forms and databases to store the results).

In the United Kingdom, Map of Agriculture Group works with several agri-food brand owners to baseline and then benchmark their “Scope 3 emissions” (i.e., the emissions from their suppliers – farming businesses). We make extensive and automated use of data that is already captured in farm and compliance software tools, reducing most farmer’s inputs to maybe an hour-long questionnaire.

And we are just scratching the surface. Remote sensing and smart data connectivity (including the businesses who supply farmers), should be able to empower farmers to rapidly quantify and report on their farm emissions (and understand the levers they can pull).

So maybe farmers will genuinely spend 5 to 75 hours annually on their farm emissions. But it would be great if a farmer could spend an hour of that time on the levy compliance, and the remainder of their time looking at how they can optimise and improve their farming system.

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